The former defence secretary Liam Fox has insisted the UK currently has "maximum leverage" to renegotiate its relationship with the European Union and should quit if its terms are not accepted because "life outside the EU holds no terror".

Fox set out his stall for a looser, trade-focused relationship with Europe, and suggested a referendum with an exit from the EU as one option should other member states refuse the UK's terms.

In a speech at a Westminster event organised by the pressure group the TaxPayers' Alliance, Fox said he wanted to start a genuine debate "with all options on the table" about how the UK sees its relationship with Europe.

He insisted he had no fears about leaving Europe, which he described as "too inward-looking and backward-looking" at a time when the global economy was expanding.

Fox echoed the stance laid out by David Cameron over the weekend when he said that like "the vast majority of British people", he wanted to change Britain's relationship with Europe, although the PM ruled out an in/out referendum on the grounds that he did not believe this was what the public wanted.

Fox dismissed growing calls for an immediate referendum on the grounds that it was a risky vote that Eurosceptics could lose. But he said that if the UK did not get what it wanted through renegotiation, it should hold a referendum and campaign for Britain's exit. However, he failed to spell out the nature of the "red lines" for Britain that would need to be met.

"I too believe that a referendum will be vital but I believe that having one now would be a huge error with enormous tactical risks," he said.

"It is not a coincidence that some convinced Euro-enthusiasts support such referendum calls, confident that a scare campaign based on false fears of political and economic isolation would win the day. Instead, I would like to see Britain negotiate a new relationship with the EU based on economic rather than political considerations and set out in clear and unambiguous language. If we succeed a referendum should be held and formal acceptance advocated. If, on the other hand, this approach is rejected outright or falls short of necessary 'red lines', then we would have no alternative but to recommend rejection and consider departure from the EU."

The former Conservative cabinet minister said that Britain should start the renegotiation process now, arguing that those who say that "this is the wrong time and that it is politically difficult or even impossible" represented "perpetual arguments for inertia".

He said the UK should seize on moves towards closer fiscal and political integration by members of the eurozone seeking to resolve the crisis, which would require the assent of the UK for treaty change, and instead put forward the country's own demands for change. "It's far better for us to be in a process where we are both looking for change, and require mutual assent, than for us to agree the situation for the other EU countries, and then ask them to agree for changes for the UK. It seems to me that maximum leverage occurs at this point."

Free from the constraints of government office, his comments went further than Cameron's, who, to the frustration of Tory Eurosceptics lobbying for an early referendum on Britain's membership, merely hinted he would be willing to consider holding a referendum in the next parliament and has so far declined to spell out whether the government would campaign for a no-vote.

Fox said the EU was "too introspective" and was not looking at the opportunities within the wider global economy.

"On trade we are told that we are inextricably bound to the EU because of our export relationships. Yet the European Union countries export more to Britain than we export to them and, since the time that we joined, WTO [World Trade Organisation] rules have increasingly meant that the free trade arrangements that we have with our European partners are guaranteed by international law and not simply by virtue of our EU membership."

He added: "For my own part, life outside the EU holds no terror as I believe globalisation will increasingly force countries to co-operate more closely on the basis of functional commonality rather than geographical proximity."

In a question-and-answer session after his speech, he said: "There are lots of people beyond Europe doing very well at the present time – much better than we are. Why should be afraid of their experience?"

Asked if he believed his intervention would be viewed by Cameron as helpful, Fox insisted this was about a national debate, beyond the perimeters of the Westminster bubble, though he conceded that making changes while the Tories were in coalition with Europhile Lib Dems would not be easy.

"There are millions of our fellow citizens who feel that their view is not listened to, that changes have been made in our relationship with the European Union that they have never given their assent to. They agreed to a common market but they have actually been delivered into an intensely political and intrusive relationship, and they would like to have a say in how that is rebalanced.

"What I hope we are doing today is starting a genuine debate in this country, with all options on the table, about how we see our relationship as a nation with the European Union, and I think that's a long overdue debate and we must not allow it to be restricted by our views about its impact on short-term party-political concerns."

The Conservative MP Peter Bone welcomed the speech. "A lot of people think the next Conservative government should renegotiate the terms with Brussels so that we just have an economic relationship and then put that to the British people. I think that's what many, many Conservatives now think should be done and what we'd like the prime minister to say very clearly."